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Marvell Technology Group Ltd. Reports Third Quarter of Fiscal 2011 Results
Revenue: $959 Million, Up 7 Percent Sequentially
GAAP Net Income: $256 Million, $0.38 per share EPS
Free Cash Flow: $338 Million, 35 Percent of Revenue

SANTA CLARA, Calif., Nov. 18, 2010 /PRNewswire via COMTEX/ --

Marvell Technology Group Ltd. (Nasdaq: MRVL), a global leader in integrated silicon solutions, today reported financial results for the third quarter of fiscal 2011, ended October 30, 2010.

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Net revenue for the third quarter of fiscal 2011 was $959 million, a 20 percent increase from $803 million in the third quarter of fiscal 2010, ended October 31, 2009, and an 7 percent sequential increase from $896 million in the second quarter of fiscal 2011, ended July 31, 2010.

GAAP net income was $256 million, or $0.38 per share (diluted), for the third quarter of fiscal 2011, compared with a GAAP net income of $202 million, or $0.31 per share (diluted), for the third quarter of fiscal 2010. GAAP net income in the second quarter of fiscal 2011 was $220 million, or $0.33 per share (diluted).

Non-GAAP net income was $307 million, or $0.45 per share (diluted), for the third quarter of fiscal 2011, as compared with non-GAAP net income of $232 million, or $0.35 per share (diluted), for the third quarter of fiscal 2010. Non-GAAP net income for the second quarter of fiscal 2011 was $273 million, or $0.40 per share (diluted).

"We delivered excellent results, which were at the high-end of our original guidance for the third quarter," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "We delivered significant long term growth in all of our target end-markets. We continue to make excellent progress within our mobile and wireless end market, which increased over 20 percent sequentially, and we experienced improved demand within our storage end-market as revenue increased 3 percent sequentially. Furthermore, we continue to deliver robust margins and significant free cash flow, which highlights the long term leverage our business model can deliver."

Marvell reports net income, basic and diluted net income per share in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income to non-GAAP net income for the three months ended October 30, 2010, July 31, 2010 and October 31, 2009 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization and write-offs of acquired intangible assets, restructuring costs and certain other expenses or benefits.

GAAP gross margin for the third quarter of fiscal 2011 was 59.3 percent, compared to 57.5 percent for the third quarter of fiscal 2010 and 59.1 percent for the second quarter of fiscal 2011.

Non-GAAP gross margin for the third quarter of fiscal 2011 was 59.5 percent, compared to 57.8 percent for the third quarter of fiscal 2010 and 59.3 percent for the second quarter of fiscal 2011.

Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2011 were 675 million shares, compared with 660 million shares in the third quarter of fiscal 2010 and 675 million shares in the second quarter of fiscal 2011. Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2011 were 677 million shares, compared with 664 million shares for the third quarter of fiscal 2010 and 678 million shares for the second quarter of fiscal 2011.

Cash flow from operations for the third quarter of fiscal 2011 was $368 million, up from the $204 million in the third quarter of fiscal 2010 and up from the $319 million reported in the second quarter of fiscal 2011. Free cash flow for the third quarter of fiscal 2011 was $338 million, up from the $196 million reported in third quarter of fiscal 2010, and up from the $292 million reported in the second quarter of fiscal 2011. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of technology licenses.

Conference Call

Marvell will be conducting a conference call on November 18, 2010 at 1:45 p.m. Pacific Time to discuss results for the third quarter of fiscal 2011. Interested parties may join the conference call by dialing 1-866-510-0707, pass-code 19248119. The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until December 18, 2010.

Discussion of Non-GAAP Financial Measures

Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP income per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP income per share, the GAAP weighted average shares outstanding (diluted)is adjusted to exclude the potential benefits of compensation costs expected to be incurred in future periods, but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also include the dilutive/antidilutive effects of common stock options and restricted stock.

Marvell believes that the presentation of non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to Marvell's financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell's Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC's website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.

About Marvell

Marvell Technology Group Ltd. (NASDAQ: MRVL) is a global leader in the development of storage, communications and consumer silicon solutions. Marvell's diverse product portfolio includes switching, transceiver, communications controller, wireless, and storage solutions that power the entire communications infrastructure, including enterprise, metro, home, and storage networking. As used in this release, the term the "Marvell" refers to Marvell Technology Group Ltd. and its subsidiaries. For more information please visit www.marvell.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the sustainability of Marvell's ability to deliver long term growth, robust margins and significant free cash flow; and statements concerning Marvell's use of non-GAAP financial measures as important supplemental information. These statements are not guarantees of results and should not be considered as an indication of future performance. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties, including, among others, Marvell's financial condition and results of operations may vary from quarter to quarter; the impact of global economic conditions on Marvell's business; significant dependence on the hard disk drive industry; highly competitive nature of the markets in which Marvell competes; reliance on a few customers; market acceptance of Marvell's products; and the impact of current or future intellectual property litigation and claims for indemnification. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's latest Annual Report on Form 10-K for the year ended January 30, 2010, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC. When Marvell files its Form 10-Q for the third quarter of fiscal 2011, the financial statements may differ from the results disclosed in this press release because judgments and estimates that management used in preparing the financial results reported in this press release may need to be updated to the date of the filing. Marvell's results also remain subject to review by Marvell's independent registered public accounting firm. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)






















Three Months Ended


Nine Months Ended







October 30,


July 31,


October 31,


October 30,


October 31,







2010


2010


2009


2010


2009
















Net revenue


$ 959,327


$ 896,474


$ 803,098


$ 2,711,380


$ 1,965,152

Cost of goods sold


390,808


366,682


341,617


1,101,475


887,306

Gross profit


568,519


529,792


461,481


1,609,905


1,077,846

Operating expenses:












Research and development


218,420


228,211


212,873


665,742


615,152


Selling and marketing


39,751


36,863


35,442


115,037


102,260


General and administrative


29,576


25,440


16,660


78,124


148,856


Amortization of acquired intangible assets

21,770


21,214


26,450


65,533


83,252



Total operating expenses


309,517


311,728


291,425


924,436


949,520

Operating income


259,002


218,064


170,056


685,469


128,326

Interest and other income (expense), net


(1,665)


4,212


(1,373)


(1,205)


(1,254)

Income before income taxes


257,337


222,276


168,683


684,264


127,072

Provision (benefit) for income taxes


1,605


2,499


(32,916)


2,988


(21,563)

Net income


$ 255,732


$ 219,777


$ 201,599


$ 681,276


148,635
















Basic net income per share


$ 0.39


$ 0.34


$ 0.32


$ 1.05


$ 0.24

Diluted net income per share


$ 0.38


$ 0.33


$ 0.31


$ 1.01


$ 0.23
















Shares used in computing basic earnings per share

649,782


648,028


623,613


646,246


621,057

Shares used in computing diluted earnings per share

674,789


675,220


659,739


676,023


647,863

Marvell Technology Group Ltd.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(Unaudited)

(In thousands, except per share amounts)






















Three Months Ended


Nine Months Ended







October 30,


July 31,


October 31,


October 30,


October 31,







2010


2010


2009


2010


2009
















GAAP net income


$ 255,732


$ 219,777


$ 201,599


$ 681,276


$ 148,635

Stock-based compensation


29,541


30,689


34,377


87,126


96,040

Amortization of acquired intangible assets


21,770


21,214


26,450


65,533


83,252

Restructuring (a)


259


1,660


1,919


2,504


15,211

Legal/Tax related matters (b)


-


-


(32,569)


4,373


38,229

Other (c)


-


-


-


-


990

Non-GAAP net income


$ 307,302


$ 273,340


$ 231,776


$ 840,812


$ 382,357
















GAAP weighted average shares - diluted


674,789


675,220


659,739


676,023


647,863


Non-GAAP adjustment


2,710


3,131


4,297


3,050


2,938

Non-GAAP weighted average shares diluted (d)

677,499


678,351


664,036


679,073


650,801
















GAAP diluted net income per share


$ 0.38


$ 0.33


$ 0.31


$ 1.01


$ 0.23

Non-GAAP diluted net income per share


$ 0.45


$ 0.40


$ 0.35


$ 1.24


$ 0.59
















GAAP gross profit:


$ 568,519


$ 529,792


$ 461,481


$ 1,609,905


$ 1,077,846


Stock-based compensation


1,818


1,692


2,389


5,746


8,315


Other


-


-


-


-


990

Non-GAAP gross profit



$ 570,337


$ 531,484


$ 463,870


$ 1,615,651


$ 1,087,151
















GAAP gross profit as a % of revenue


59.3%


59.1%


57.5%


59.4%


54.8%


Stock-based compensation


0.2%


0.2%


0.3%


0.2%


0.4%


Other


-


-


-


-


0.1%

Non-GAAP gross profit



59.5%


59.3%


57.8%


59.6%


55.3%
















GAAP research and development:


$ 218,420


$ 228,211


$ 212,873


$ 665,742


$ 615,152


Stock-based compensation


(19,795)


(22,089)


(24,134)


(60,735)


(68,064)


Restructuring


(187)


(1,370)


(1,338)


(1,686)


(10,704)


Legal/Tax settlement


-


-


-


-


1,820

Non-GAAP research and development


$ 198,438


$ 204,752


$ 187,401


$ 603,321


$ 538,204
















GAAP selling and marketing:



$ 39,751


$ 36,863


$ 35,442


$ 115,037


$ 102,260


Stock-based compensation


(3,208)


(2,397)


(4,087)


(8,778)


(11,457)


Restructuring



-


-


(51)


-


(1,839)


Legal/Tax settlement



-


-


-


-


659

Non-GAAP selling and marketing


$ 36,543


$ 34,466


$ 31,304


$ 106,259


$ 89,623
















GAAP general and administrative:


$ 29,576


$ 25,440


$ 16,660


$ 78,124


$ 148,856


Stock-based compensation


(4,720)


(4,511)


(3,767)


(11,867)


(8,204)


Restructuring


(72)


(290)


(530)


(818)


(2,668)


Legal/Tax settlement


-


-


-


-


(71,842)

Non-GAAP general and administrative


$ 24,784


$ 20,639


$ 12,363


$ 65,439


$ 66,142































(a)

Amounts represent restructuring-related charges, including severance costs from reductions in force and asset impairment, as well as a charge related to facilities impairment.



(b)

The nine months ended October 30, 2010 includes an amount representing the portion of an IP litigation settlement. The nine months ended October 31, 2009 includes a $72.0 million charge in connection with the settlement of a class action litigation. This is offset by a $27.3 million benefit in the fiscal quarter ended October31, 2009 resulting from the expiration of the statute of limitations related to a tax contingency reserve, in addition to a $5.3 million income tax benefit related to the adjustment of a prior year deferred tax asset.



(c)

The nine months ended October 31, 2009 includes underutilization charges related to the rampdown of the Malaysia test operations.
















(d)

For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation costs attributable to future services and not yet recognized in the financial statements.



Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)


















October 31,


January 30,

Assets





2010


2010

Current assets:





Cash, cash equivalents, and short-term investments

$ 2,675,273


$ 1,796,717


Accounts receivable, net



467,975


356,796


Inventories





227,936


241,541


Prepaid expenses and other current assets


78,576


70,491



Total current assets



3,449,760


2,465,545

Property and equipment, net



347,588


342,497

Long-term investments




30,865


34,281

Goodwill and acquired intangible assets, net


2,131,666


2,176,763

Other non-current assets




161,793


151,854



Total assets




$ 6,121,672


$ 5,170,940











Liabilities and Shareholders' Equity





Current liabilities:








Accounts payable




$ 352,216


$ 283,362


Accrued liabilities




234,710


201,920


Income taxes payable




22,540


19,992


Deferred income




88,216


59,396


Current portion of capital lease obligations


1,011


1,940



Total current liabilities



698,693


566,610

Capital lease obligations, net of current portion


-


511

Other long-term liabilities




194,973


185,840



Total liabilities




893,666


752,961











Shareholders' equity:








Common stock




1,297


1,277


Additional paid-in capital



4,732,088


4,607,844


Accumulated other comprehensive income (loss)

3,602


(885)


Retained earnings (accumulated deficit)


491,019


(190,257)



Total shareholders' equity



5,228,006


4,417,979



Total liabilities and shareholders' equity


$ 6,121,672


$ 5,170,940

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)
























Three Months Ended


Nine Months Ended









October 30,


October 31,


October 30,


October 31,









2010


2009


2010


2009

Cash flows from operating activities:










Net income





$ 255,732


$ 201,599


$ 681,276


$ 148,635

Adjustments to reconcile net income to net cash provided









by operating activities:













Depreciation and amortization




23,140


24,571


68,991


74,976


Stock-based compensation




29,541


34,377


87,126


96,040


Amortization of acquired intangible assets



21,770


26,450


65,533


83,252


Facilities impairment





-


-


1,140


-


Amortization of marketable securities premium



4,756


-


9,568


-


Fair market value adjustment to acquired inventory sold


(401)


(10,807)


(2,391)


(13,883)


Excess tax benefits from stock-based compensation


(440)


(136)


(669)


(205)


Deferred income taxes




(5,029)


263


(6,486)


6,131


Changes in assets and liabilities:












Restricted cash





-


24,500


-


24,500



Accounts receivable




22,780


(65,857)


(111,179)


(172,218)



Inventories





11,940


(17,039)


15,856


83,548



Prepaid expenses and other assets



(10,172)


(1,362)


(3,718)


7,559



Accounts payable




(34,508)


38,281


63,935


172,062



Accrued liabilities and other




8,205


(82,687)


10,785


(13,628)



Accrued employee compensation



33,065


36,123


26,965


35,149



Income taxes payable




5,310


(33,988)


7,163


(29,060)



Deferred income




2,197


29,246


28,820


27,538




Net cash provided by operating activities


367,886


203,534


942,715


530,396

Cash flows from investing activities:











Purchases of investments




(312,890)


(426,998)


(1,023,700)


(426,998)


Sales and maturities of investments



330,993


10,268


678,738


10,318


Cash paid for acquisitions, net




-


-


(20,679)


-


Purchases of technology licenses



(5,830)


-


(12,649)


(12,550)


Purchases of property and equipment



(23,969)


(7,629)


(63,267)


(14,808)




Net cash used in investing activities



(11,696)


(424,359)


(441,557)


(444,038)

Cash flows from financing activities:


























Repurchase of common stock




(60,594)


-


(60,594)


-


Proceeds from employee stock plans



17,196


13,728


97,673


34,749


Principal payments on capital lease obligations



(490)


(451)


(1,440)


(1,326)


Excess tax benefits from stock-based compensation


440


136


669


205




Net cash (used in) provided by financing activities


(43,448)


13,413


36,308


33,628

Net increase (decrease) in cash and cash equivalents


312,742


(207,412)


537,466


119,986

Cash and cash equivalents at beginning of period



1,330,152


1,254,807


1,105,428


927,409

Cash and cash equivalents at end of period



$ 1,642,894


$ 1,047,395


$ 1,642,894


$ 1,047,395

For further information, contact:

Jeff Palmer

Tom Hayes

Investor Relations

Corporate Marketing

408-222-8373

408-222-2815

jpalmer@marvell.com

tom@marvell.com

SOURCE Marvell Technology Group Ltd.